New Federal Government regulations covering data centre energy efficiency will be in place from mid-2025 as Australia and the world grapple with the enormous energy required to power data centres amid the growth in artificial intelligence capability.

The energy efficiency standards will relate to data centres hosting Federal agency workloads, requiring them to achieve a five-star rating under the National Australian Built Environment Rating System.

The five-star rating system previously only applied to data centres on a Data Centre Panel, but from July 1 next year will apply to new data centre facilities that are sourced outside the panel arrangement, whether owned or leased by the Commonwealth.

A report by consultants Morgan Stanley released in May said that one of the biggest questions around the boom in generative artificial intelligence has been how much energy will be needed to bring the full potential of the revolutionary — but incredibly power-intensive — technology to businesses and consumers.

By some estimates, data centres consume about 2.5 per cent of global electricity, with forecasts of that figure increasing to 7.5 per cent by 2030.

The power needs of AI technology were referenced at the Energy Club WA’s May Industry Dinner.

Microsoft Technology Strategist Justin Rowling said the company had 200 data centres in 60 regions, with generative AI technology requiring more power for its operation.

“The opportunity for the energy industry to assist by providing clean energy is enormous,” Mr Rowling said. “Microsoft intend to be carbon negative, water positive and produce zero waste across their entire production chain by 2030, and by 2050 Microsoft will have undone all of the carbon emissions of its 50-year history.

“In practice, the technology to do that doesn’t exist today, so the technology industry is looking to the energy industry to innovate and come up with those new technologies we need, because we know what got us to where we are today is not going to get us to where we need to go tomorrow.”

The Morgan Stanley report said that as demand for generative AI continues to escalate and it becomes embedded into more products and services, energy demand is expected to intensify.

Its research indicated that generative AI’s power demands will skyrocket 70 per cent annually.

By 2027, generative AI could use as much energy as Spain needed to power itself in 2022, it said.

“We were surprised by our own projections showing such a rapid surge in power demand within just a few years,” Simon Flannery, Morgan Stanley Research analyst said. “We think the huge step up in energy needs is not well understood by the market and hasn’t been priced into a number of stocks.”

Funds manager Alphinity said the growth of generative AI and large language are reigniting electricity demand, challenging the adequacy of power supplies and infrastructure.

“The energy demand from data centres, already high, is predicted to grow, prompting significant investments in energy infrastructure, including natural gas and power distribution systems,” it said in a report.

“Owners of data centres, most of whom have committed to net-zero targets, face a dilemma with surging electricity needs.

“Renewable energy sources offer intermittent supply with 25-40% capacity factors and when paired with energy storage, higher costs.

“With the rapid growth in AI demand necessitating immediate and reliable power, gas generation emerges as a logical short-term solution, providing consistent electricity around the clock.

“Renewables will still grow in importance, especially as the cost of energy storage falls.”

Ryan Lance, CEO of Conoco Phillips, quoted in the Alphinity report, said:  “The energy needs over the course of the next couple of decades (driven by AI) is going to be enormous and over the next 5-10yrs, the amount of gas fired power generation that will be required to deliver that electricity, to fire all the data warehouses, that are going to be required is going to be enormous.”

Return to eNews